text:
For the purpose of this title, the following definitions shall be used:

(a) “Discount buying organization” means any person or persons, corporation, unincorporated association, or other organization which, for a consideration, provides or purports to provide its clients or the clients or members of any other discount buying organization with the ability to purchase goods or services at discount prices, except that a discount buying organization does not include any of the following:

(1) Any discount buying organization in which the total consideration paid by each client or member in any manner whatsoever for the purchase of discount buying services from the organization that either:

(A) Does not exceed a one-time fee of fifty dollars ($50) or an annual fee of twenty-five dollars ($25) to be paid on a yearly basis.

(B) Does not exceed a one-time or annual fee of fifty dollars ($50) and the organization provides a majority of the goods and services through purchases by members who walk in to a fixed location operated by the organization.

(2) Any discount buying organization in which the total consideration paid by each client or member in any manner whatsoever for the purchase of discount buying services from the organization does not exceed a one-time or annual fee of one hundred dollars ($100) and the organization does all of the following in subparagraphs (A) to (F), inclusive, and subject to subparagraph (G):

(A) Offers buying services to clients or members through toll-free telephone access, computer access, or video shopping terminals.

(B) (i) During the first year of membership of each member, upon the request of the member, provides a full refund of membership fees, exclusive of any fees, however designated, not exceeding ten dollars ($10) in the aggregate, without conditions other than the surrender or destruction of materials which allow the member to access or use the service.

(ii) (I) The organization shall establish an escrow account of fifty thousand dollars ($50,000) for the purpose of providing refunds to members, pursuant to clause (i). If the fifty thousand dollars ($50,000) deposited in escrow is depleted during the first year of the existence of the escrow account, the organization shall within three business days of depletion replenish the account in the amount of fifty thousand dollars ($50,000). For each calendar year thereafter, the organization shall deposit in the account an amount equal to refunds made from the account in the prior calendar year, but not less than fifty thousand dollars ($50,000). At any time the balance in the escrow account decreases to 50 percent of the amount funded that year, the organization shall within three business days replenish the account back to the balance required at the beginning of that calendar year. The organization shall provide proof of the establishment of the escrow account to the Secretary of State and shall maintain records of all member requests for refunds and refunds made pursuant to this clause. The records shall be made available for review upon request by the Attorney General, any district attorney, or the Department of Justice.

(II) The escrow account shall be established and maintained at a federally insured bank or federally insured financial institution independent of the organization with escrow instructions making the bank or financial institution or an officer or employee thereof the escrow trustee.

(III) Refunds shall be made from the escrow account to any member who provides proof of membership while a California resident and requests, in writing, a membership refund, and has not previously been refunded his or her membership fee. The escrow trustee shall issue the refund within 10 days of the date the written request is received by the escrow trustee. In addition, requests for refunds may be made directly to and paid directly by the organization.

(IV) Proof of creation of the escrow account, and membership refund information, shall be provided to the members in the following form:

“The ____ (organization) has established an escrow account for the refund of membership fees at ____ (financial institution). Refunds from the escrow account may, in addition to other remedies and sources available to you, be obtained by mailing a written request along with proof of membership to ____ (escrow trustee). This refund request shall not affect or limit any other remedy at law available to you.”

(C) Provides at least 15 toll-free service lines to California consumers devoted exclusively to customer service questions and complaints.

(D) Maintains a bond which meets the requirements of Sections 1812.103 and 1812.104, except that the principal sum of the bond need only be twenty thousand dollars ($20,000).

(E) (i) Possesses an unrevoked acknowledgment from the Attorney General that the organization has provided to the Attorney General, to the Attorney General’s reasonable satisfaction, marketing procedures and documents that clearly explain membership fee cancellation and refund terms which include:

(I) The amount of the initial membership fee and how and when it will be collected.

(II) If applicable, that a member must be advised, before any charges are applied, that they need not provide billing information in order to be charged a membership fee, in circumstances in which the telemarketing firm has prior access to the member’s billing information.

(III) In the case of trial membership offers, the duration of the trial period and that if the member does not cancel within the trial period he or she will automatically be charged the membership fee.

(IV) Specifically how the member may cancel membership.

(V) The written disclosure, printed in capital letters with a minimum 14-point boldface type, indicating who to contact, both directly through the company and through the escrow account, for a refund.

(VI) The written disclosure made at the time of solicitation and at the time an enrollment package is sent to consumers.

(ii) When an organization provides documentation that clearly explains membership fee cancellation and refund terms to the Attorney General’s reasonable satisfaction, which includes the information required by subclauses (I) to (VI), inclusive, of clause (i) of subparagraph (E), the Attorney General shall issue a revocable acknowledgment to the organization for it to obtain this exception. The acknowledgment issued by the Attorney General is not evidence of the adequacy or accuracy of the organization’s actual disclosures and representations provided to consumers. No organization in any marketing to consumers may make any reference to an acknowledgment issued by the Attorney General under this clause.

(F) Provides the disclosures listed in subclauses (I) to (VI), inclusive, of clause (i) of subparagraph (E) to every prospective member.

(G) The exemption is null and void if the organization fails to comply with the conditions set forth in this section or if the Attorney General’s office revokes the exemption due to a organization not being in full compliance with all of the provisions of this section.

(3) Any discount buying organization in which persons receive discount buying services incidentally as part of a package of services provided to or available to the individual on account of his or her membership in the organization, which is not organized for the profit of any person or organization, and which does not have as one of its primary purposes or businesses, the provision of discount buying services.

(4) Any person, corporation, unincorporated association, or other organization, which, for a consideration collected from another entity, provides or purports to provide the clients of the other entity with the ability to purchase goods or services at discount prices, if the clients of the other entity do not order from, or pay any money to, that person, corporation, unincorporated association, or other organization; however, the entity, from which the customer purchases the right to obtain goods or services at discount prices, shall comply with the requirements of this title.

(b) “Contract for discount buying services” means a contract between one party (hereinafter referred to as the “buyer”) who is purchasing the service for personal or family use, and a discount buying organization, whereby the buyer for a consideration receives the right to obtain goods or services from the discount buying organization, or to utilize the discount buying organization services in obtaining goods and services, at discount prices.

(c) “Discount prices” means prices which are represented to be lower on most or all offered goods or services than those generally charged for the items in the locality in which the representation is made.

This definition is not intended to affect the degree of savings which must be offered on an item or selection of items in order to truthfully and without misleading consumers represent an item, selection of items, or entire store as being “discount” or “discounted.”

history: (History: Amended by Stats. 2001, Ch. 178, Sec. 1. Effective January 1, 2002.)

path: 2.6. CONTRACTS FOR DISCOUNT BUYING SERVICES


kind: section

code: CIV

text: Every discount buying organization shall maintain a bond issued by a surety company admitted to do business in this state. The principal sum of the bond shall be twenty thousand dollars ($20,000). A copy of such bond shall be filed with the Secretary of State.

history: (History: Amended by Stats. 1996, Ch. 633, Sec. 8. Effective January 1, 1997.)

title: 2.6. CONTRACTS FOR DISCOUNT BUYING SERVICES


text: The bond required by Section 1812.103 shall be in favor of the State of California for the benefit of any person who is damaged by any violation of this title or by fraud or dishonesty or failure to provide the services of the discount buying organization in performance of the contract. The surety shall be liable only for the actual damages plus restitution and not the treble damages permitted under subdivision (a) of Section 1812.123.

history: (History: Amended by Stats. 1982, Ch. 517, Sec. 62.)


text:
(a) When a deposit has been made in lieu of a bond pursuant to Section 995.710 of the Code of Civil Procedure, the person asserting a claim against the deposit shall, in lieu of Section 996.430 of the Code of Civil Procedure, establish the claim by furnishing evidence to the Secretary of State of a money judgment entered by a court together with evidence that the claimant is a person described in Section 1812.104.

(b) When a person has established the claim with the Secretary of State, the Secretary of State shall review and approve the claim and enter the date of approval on the claim. The claim shall be designated an “approved claim.”

(c) When the first claim against a particular deposit has been approved, it shall not be paid until the expiration of a period of 240 days after the date of its approval by the Secretary of State. Subsequent claims that are approved by the Secretary of State within the same 240-day period shall similarly not be paid until the expiration of the 240-day period. Upon the expiration of the 240-day period, the Secretary of State shall pay all approved claims from that 240-day period in full unless the deposit is insufficient, in which case each approved claim shall be paid a pro rata share of the deposit.

(d) When the Secretary of State approves the first claim against a particular deposit after the expiration of a 240-day period, the date of approval of that claim shall begin a new 240-day period to which subdivision (c) shall apply with respect to the amount remaining in the deposit.

(e) After a deposit is exhausted, no further claims shall be paid by the Secretary of State. Claimants who have had their claims paid in full or in part pursuant to subdivisions (c) and (d) shall not be required to return funds received from the deposit for the benefit of other claimants.

(f) When a deposit has been made in lieu of a bond, the amount of the deposit shall not be subject to attachment, garnishment, or execution with respect to an action or judgment against the discount buying organization, other than as to an amount as no longer needed or required for the purpose of this title that would otherwise be returned to the discount buying organization by the Secretary of State.

(g) The Secretary of State shall retain a cash deposit for two years from the date the Secretary of State receives written notification from the assignor of the deposit that the assignor has ceased to engage in the business of a discount buying organization or has filed a bond pursuant to Section 1812.103, provided that there are no outstanding claims against the deposit. This written notice shall include all of the following: (1) name, address, and telephone number of the assignor; (2) name, address, and telephone number of the bank at which the deposit is located; (3) account number of the deposit; and (4) a statement whether the assignor is ceasing to engage in the business of a discount buying organization or has filed a bond with the Secretary of State. The Secretary of State shall forward an acknowledgment of receipt of the written notice to the assignor at the address indicated therein, specifying the date of receipt of the written notice and anticipated date of release of the deposit, provided there are no outstanding claims against the deposit.

(h) A judge of a superior court may order the return of the deposit prior to the expiration of two years upon evidence satisfactory to the judge that there are no outstanding claims against the deposit or order the Secretary of State to retain the deposit for a sufficient period beyond the two years specified in subdivision (g) to resolve outstanding claims against the deposit.

history: (History: Amended by Stats. 2002, Ch. 784, Sec. 14. Effective January 1, 2003.)


text:
Every discount buying organization, before obtaining the signature of a potential buyer on any application or contract for discount buying services, shall provide to the buyer, and shall allow the buyer to retain, the following written disclosures:

(a) The exact nature of the services it provides, specifying the general categories of goods that are available at the discount buying organization’s place of business or warehouse, those categories of goods, if any, that must be ordered or obtained through stores to which the discount buying organization will refer the customer, and those categories of goods, if any, that must be ordered or obtained through the mail.

(b) A list, current within the previous 60 days, of at least 100 items that are sold by or through the organization or available to those who contract with the organization, identified by brand name, model, and total price including a reasonable estimate of freight charges, if any are to be imposed; a reasonable estimate of delivery charges, if any are to be imposed; a reasonable estimate of setup charges, if any are to be imposed; the discount buying organization’s price markup; and a reasonable estimate of any other charges the discount buying organization imposes. These items shall be reasonably representative as to the type of goods available. In lieu of providing this list, the discount buying organization shall provide and allow the buyer to retain a list of at least 100 items that were purchased by its members through the discount buying organization during the preceding 60 days. This list shall identify the items by brand name, model, and total selling price including freight charges, if any; delivery charges, if any; setup charges, if any; the discount buying organization’s price markup; and any other charges imposed by the discount buying organization, and shall be representative as to the type of goods sold and the prices charged for the listed goods sold during that period. If the maximum number of items available through a discount buying organization is fewer than 100 in number, it may comply with this section by furnishing a list of the total items available, identified as described above with a statement that those are the only goods presently available. Any list required by this subdivision shall state the date on which it was prepared.

(c) A statement of the discount buying organization’s policy with respect to warranties or guarantees on goods ordered, and the policy with respect to the return of ordered goods, cancellation of orders by the buyer, and refunds for cancellation or return.

(d) A description of any charges, such as freight charges, delivery charges, setup charges, seller’s markup, and any other charges that are incidental to the purchase of goods through the discount buying organization and are to be paid by the buyer. A disclosure of these costs in specific monetary amounts shall also be made on each order placed through the discount buying organization.

(e) If any stockholder, director, officer, or general or limited partner of the discount buying organization, as the case may be:

(1) Has been convicted of a felony or misdemeanor or pleaded nolo contendere to a felony or misdemeanor charge, if the felony or misdemeanor involved fraud, embezzlement, fraudulent conversion, misappropriation of property, or a violation of this title.

(2) Has been held liable in a civil action by final judgment or consented to the entry of a stipulated judgment if the civil action alleged fraud, embezzlement, fraudulent conversion, or misappropriation of property, a violation of this title, the use of untrue or misleading representations in an attempt to sell or dispose of real or personal property, or the use of unfair, unlawful, or deceptive business practices.

(3) Is subject to any currently effective injunction or restrictive order relating to business activity as the result of an action brought by a public agency or department, including, but not limited to, an action affecting any vocational license, a statement so stating, and including the name of the court, the date of the conviction, judgment, order, or injunction and, if applicable, the name of the governmental agency that filed the action resulting in the conviction, judgment, order, or injunction.

history: (History: Amended by Stats. 2006, Ch. 538, Sec. 50. Effective January 1, 2007.)


text: Every contract for discount buying services shall be in writing and shall be subject to the provisions of this title. The address of the seller’s discount buying facility and the residence address of the buyer shall be clearly indicated on the face of the contract. A copy of the written contract shall be given to the buyer at the time he signs the contract. All blank spaces in the contract shall be filled in before the contract is signed by the buyer. Provisions or terms written by hand on the buyer’s copy shall be legible. The contract shall disclose that a bond has been obtained by the discount buying organization and that a copy of such bond is on file with the Secretary of State. The contract shall be specific as to the period of time for which the discount buying services will be available to the buyer. This time period shall not be measured by the life of the buyer.

history: (History: Added by Stats. 1976, Ch. 237.)


text: All contracts for discount buying services, which may be in effect between a seller or related sellers and a buyer, the terms of which overlap for any period of time, shall be considered as one contract for the purpose of this title.


text: No contract for discount buying services shall require payments or financing by the buyer over a period in excess of two years from the date the contract was entered into.


text: Every contract for discount buying services shall provide that the buying services shall become available to the buyer within seven days from the date the contract was entered into.


text: No contract for discount buying sevices shall require or entail the execution of any note or series of notes by the buyer which, when separately negotiated, will cut off as to any third party any right of action or defense which the buyer may have against the seller.


text: No right of action or defense arising out of a contract for discount buying services which the buyer has against the discount buying organization shall be cut off by assignment or transfer of the contract to any third party.


text:
(a) Every contract for discount buying services shall provide that if any goods ordered by the buyer from the seller are not delivered to the buyer or available for pickup by the buyer at a location within his county of residence within six weeks from the date the buyer placed an order for such goods, then any moneys paid by the buyer for such goods in advance of delivery shall, upon the buyer’s request, be fully refunded unless a predetermined delivery date has been furnished to the buyer in writing at the time he ordered such goods and the goods are delivered to the buyer or are available for pickup by that date.

(b) Prior to receiving from a buyer any payments pursuant to the terms of a contract for discount buying services, the discount buying organization shall establish a trust account at a federally insured bank or savings and loan association for the deposit, except for the first fifty dollars ($50) of a downpayment, of the contract payments as they are received.

If the discount buying organization sells or assigns the contract for discount buying services to a third party and such third party pays the discount buying organization as consideration an amount which is commercially reasonable for the sale or assignment of the contract, the discount buying organization shall deposit all funds received from the third party into the trust account.

If the discount buying organization in any manner transfers the contract for discount buying services to a third party which is to act as the recipient of contract payments from the buyer and such third party does not pay the discount buying organization as consideration for such transfer an amount which is commercially reasonable, then all sums received by the third party from the buyer shall be deposited in the discount buying organization’s trust account for contract payments.

As to each buyer, during the first one-fourth or first six months of the buyer’s membership period, whichever is shorter, funds representing no more than one-fourth of the contract price may be withdrawn from the trust account. During each subsequent one-fourth or six-month period, whichever is shorter, funds representing an additional one-fourth of the contract price may be withdrawn from the trust account.

(c) (1) Prior to receiving funds for an order of goods or services from any buyer, the discount buying organization shall establish a trust account at a federally insured bank or savings and loan association for the deposit of the funds. The discount buying organization shall deposit into the account all funds received from buyers for orders of goods or services regardless of how the funds are styled, including but not limited to, down payment, partial payment, payment in full, freight charge, or any other terms. If the total cost of goods or services ordered by a buyer on any one day does not exceed fifty dollars ($50), including taxes, freight charges, delivery charges, markup and all other charges collected by the discount buying organization, then the funds received from the buyer need not be deposited in the trust account.

(2) The trust account required by this section shall be created and maintained for the benefit of buyers who order goods or services from or through the discount buying organization. The discount buying organization shall not in any manner encumber the corpus of the account and shall not withdraw money deposited therein on behalf of a buyer except: (i) in partial or full payment to the discount buying organization’s source for the goods or services ordered by the buyer, or (ii) to make a refund to the buyer. After the withdrawal of money from a buyer’s deposit pursuant to (i) or (ii) above, only that portion of the remainder of the deposit which represents compensation to the discount buying organization may be withdrawn.

history: (History: Amended by Stats. 1980, Ch. 1001, Sec. 2. Effective September 21, 1980.)


text:
(a) An affiliate discount buying organization may, at its option, and with the express written consent of its parent, comply with the trust account withdrawal provisions set forth in subdivision (b), in lieu of those contained in subdivision (b) of Section 1812.116.

(b) The affiliate shall comply with the trust account provisions of subdivision (b) of Section 1812.116, except that:

(1) As to each buyer, during the first one-fourth or first six months of the buyer’s membership period, whichever is shorter, funds representing no more than one-half of the contract price may be withdrawn from the trust account.

(2) During the subsequent one-fourth or six-month period of the buyer’s membership period, whichever is shorter, the remaining balance of the contract price may be withdrawn from the trust account.

(c) To qualify for the provisions set forth in subdivision (b), (1) the affiliate shall maintain a surety bond of two hundred fifty thousand dollars ($250,000), and (2) the parent shall maintain an aggregate surety bond of two million five hundred thousand dollars ($2,500,000) and a letter of credit, as set forth in subdivision (d), for all of its affiliates that qualify for the withdrawal provisions of subdivision (b). The bonds shall be issued by a surety company admitted to do business in this state. A copy of each bond shall be filed with the Secretary of State, with a copy provided to the Attorney General. The affiliate’s bond shall be in lieu of the bond required by subdivision (a) of Section 1812.103. The surety bonds shall comply with the requirements of this section and shall be in favor of the State of California for the benefit of consumers harmed by any violation of this title by the affiliate, the failure of the affiliate to comply with the terms of its membership contracts with consumers, and the failure of the affiliate to comply with the terms of any agreement with consumers for the purchase of goods or services, provided the bonds shall cover only pecuniary loss and not exemplary damages or treble damages permitted under subdivision (a) of Section 1812.123, and provided further the parent’s bond shall not be drawn on until the affiliate’s bond is exhausted.

(d) The parent shall continuously maintain and provide to the Attorney General as beneficiary an irrevocable letter of credit issued by a California state chartered bank or a national bank with its principal place of business in the State of California, in the amount of one million dollars ($1,000,000), in a form satisfactory to the Attorney General. After the bonds described in subdivision (c) have been exhausted, only the Attorney General, by and through the Attorney General’s deputy or assistant, may draw on the letter of credit for the satisfaction of any final judgments based on any violation of this title by the affiliate, the failure of the affiliate to comply with the terms of its membership contracts with consumers, or the failure of an affiliate to comply with the terms of any agreement with consumers for the purchase of goods or services, provided the liability is established by final judgment of a court of competent jurisdiction and the time for appeal has expired or, if an appeal is taken, the appeal is finally determined and the judgment is affirmed, and provided further the letter of credit shall cover only pecuniary loss and not exemplary damages or treble damages permitted under subdivision (a) of Section 1812.123. The letter of credit shall provide that payment shall be made to the Attorney General upon presentation to the issuer of a sight draft stating only the amount drawn and signed by the Attorney General or by an Assistant or Deputy Attorney General. Any amount received by the Attorney General under the letter of credit shall be used exclusively to satisfy final judgments as described in this subdivision. The Attorney General may apply to the court for orders as desired or needed to carry out the provisions of this subdivision.

(e) In addition to other lawful means for the enforcement of the surety’s liability on the bonds required by this section, the surety’s liability may be enforced by motion after a final judgment has been obtained against an affiliate based on any violation of this title by the affiliate, the failure of the affiliate to comply with the terms of its membership contracts with consumers, or the failure of the affiliate to comply with the terms of any agreement with consumers for the purchase of goods or services. The bond of the parent shall not be drawn on until the bond of the affiliate has been exhausted, as provided in subdivisions (c) and (d). The motion may be filed by the Attorney General, a public prosecutor, or any person who obtained the judgment without first attempting to enforce the judgment against any party liable under the judgment. The notice of motion, motion, and a copy of the judgment shall be served on the surety as provided in Chapter 5 (commencing with Section 1010) of Title 14 of Part 2 of the Code of Civil Procedure. The notice shall set forth the amount of the claim, a brief statement indicating that the claim is covered by the bond, and, if the motion is to enforce liability under the bond provided by the parent, a statement that the bond provided by the affiliate has been exhausted or will be exhausted if the motion is granted. Service shall also be made on the Attorney General directed to the Consumer Protection Section. The court shall grant the motion unless the surety establishes that the claim is not covered by the bond or unless the court sustains an objection made by the Attorney General that the grant of the motion might impair the rights of actual or potential claimants or is not in the public interest. The court may, in the interest of justice, order a pro rata or other equitable distribution of the bond proceeds.

(f) (1) The bond required by subdivision (c) for an affiliate shall be continuously maintained by the affiliate until the date the affiliate ceases to make the election under subdivision (a) or ceases to engage in the business of a discount buying organization. The bond required by subdivision (c) for the parent shall be continuously maintained by the parent until the date all affiliates cease to make the election under subdivision (a) or all affiliates cease to engage in the business of a discount buying organization.

(2) Notwithstanding the expiration or termination of any bond required under this section, the bond remains in full force and effect for all liabilities incurred before, and for acts, omissions, and causes existing or which arose before, the expiration or termination of the bond. Legal proceedings may be had therefor in all respects as though the bond were in effect.

(3) The letter of credit required under subdivisions (c) and (d) shall be continuously maintained for a period of four years after all affiliates cease to make the election under subdivision (a) or cease to engage in the business of a discount buying organization, provided the period shall be extended until there is a final judgment, as described in subdivision (d), entered in each action seeking relief that may be covered by the letter of credit if the action was filed before the expiration of the four-year period.

(g) Subdivision (a) of Section 1812.121 does not apply to a discount buying organization that offers substantially equivalent alternative at-home ordering service through other generally available channels of communications, such as the internet, for the same categories of goods and services, provided the ordered goods are shipped either to the home or to a freight receiver within 20 miles of the buyer’s residence at the time the buyer entered into the contract for discount buying services.

(h) For purposes of this section, the following terms apply:

(1) “Affiliate” or “affiliate discount buying organization” means a discount buying organization that is a subsidiary of a parent, as defined in paragraph (4), or operates under a franchise, as defined in paragraph (3), granted by a parent.

(2) “Consumer” or “buyer” means and includes a client or member of an affiliate discount buying organization.

(3) “Franchise” has the same meaning as in Section 31005 of the Corporations Code.

(4) “Parent” means a business entity that directly or indirectly has franchised or operated 25 or more discount buying organizations for 10 years or more.

history: (History: Amended by Stats. 2024, Ch. 853, Sec. 15. (AB 3281) Effective January 1, 2025.)


text: Every contract for discount buying services shall further provide that such contract may be canceled at any time within three days after the date of receipt by the buyer of a copy of the contract by written notice to the seller at the address specified in the contract. If such cancellation is made, all moneys paid pursuant to the contract shall be refunded. Every contract for discount buying services shall be subject to the cancellation privileges and comply with the requirements of Sections 1689.6 and 1689.7 of this code.


text:
(a) Any contract for discount buying services which does not comply with the applicable provisions of this title shall be voidable by the buyer.

(b) No discount buying organization shall make or authorize the making of any reference to its compliance with this title.

history: (History: Amended by Stats. 1980, Ch. 1001, Sec. 3. Effective September 21, 1980.)


text: Any untrue or misleading information, representation, notice or advertisement of the seller which has been received by or made to the buyer prior to his signing a contract for discount buying services shall render the contract for discount buying services void and unenforceable by the seller. No seller shall make or disseminate such information, representations, notices or advertisements. The phrase “untrue or misleading information, representation, notice, or advertisement” shall include any acts which constitute violations of Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code. However, neither this section nor any other section of this title shall operate to exempt discount buying services from any other provisions of law, including the penalty provisions of Section 17536 of the Business and Professions Code and Section 3370.1 of this code.


text:
(a) If a discount buying organization removes its place of business or, if it conducts business at more than one location, that place of business which is geographically closest to the buyer’s residence indicated on the face of the contract, more than 20 miles farther from the buyer’s residence than it was at the time the contract for discount buying services was entered into, the organization shall offer rescission and a pro rata refund to each buyer affected, based upon the amount of time for which the buyer has been a member of the organization.

(b) If a discount buying organization discontinues providing any category of goods or services disclosed in compliance with Section 1812.106 or otherwise represented to the buyer to be available at or before the buyer’s signing of the contract for discount buying services, the organization shall offer rescission and a pro rata refund based upon the amount of time for which the buyer has been a member of the organization, to each buyer who was informed of the availability of the category of goods or services to be discontinued and signed a contract for discount buying services within the six months immediately preceding the discontinuance of said category of goods or services.


text: Any transfer by a discount buying organization of its duty or obligation to provide services to buyers under its contracts for discount buying services to another individual, corporation, or other business entity, as a result of which a buyer shall have available substantially fewer goods and services, shall constitute a complete defense to an action for further enforcement of or collection on such a contract for discount buying services which may be asserted by any buyer who did not consent in writing, after a full and fair disclosure of the categories of goods and services to be provided by the new discount buying organization, to such transfer of the duty or obligation of performance, and shall entitle such a nonconsenting individual to rescind the contract and obtain a pro rata refund from the transferor.


text:
(a) Any buyer injured by a violation of this title may bring an action for the recovery of damages and return of all moneys paid by the buyer to the seller. Judgment shall be entered for three times the amount at which the actual damages, plus such restitution, are assessed plus reasonable attorney’s fees and costs. In the event that the court finds a violation of Section 1812.120 relating to untrue or misleading statements, judgment shall be entered for one thousand dollars ($1,000) plus reasonable attorney’s fees or three times the amount of actual damages plus restitution plus reasonable attorney’s fees, whichever is greater.

(b) Notwithstanding any other provision of this title, any failure to comply with any provision of this title except Section 1812.120 may be corrected within 30 days after the execution of the contract by the buyer, and if so corrected, neither the seller nor his transferee shall be subject to any liability under this title except that of a suit for actual damages plus reasonable attorney’s fees and costs, provided that any correction must be concurred in, in writing, by the buyer, or the contract shall be void and unenforceable by the seller, who shall forthwith tender to the buyer a full refund. “Transferee” includes holders and assignees.


text:
(a) Any person who violates subdivision (b) or (c) of Section 1812.116 shall, upon conviction, be fined not more than ten thousand dollars ($10,000) for each violation, or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or imprisoned in a county jail for not more than one year, or be punished by both that fine and imprisonment.

(b) Any person who violates any other provision of this title shall be guilty of a misdemeanor.

history: (History: Amended by Stats. 2011, Ch. 15, Sec. 33. (AB 109) Effective April 4, 2011. Operative October 1, 2011, by Sec. 636 of Ch. 15, as amended by Stats. 2011, Ch. 39, Sec. 68.)


text: The prohibitions of this title are not exclusive and do not relieve the parties or the contracts subject thereto from compliance with any other applicable provision of law.


text: Any waiver by the buyer of the provisions of this title shall be deemed contrary to public policy and shall be void and unenforceable.


text: If any provision of this title or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the title which can be given effect without the invalid provision or application, and to this end the provisions of this title are severable.


text:
(a) The Secretary of State shall enforce the provisions of this title that govern the filing and maintenance of bonds and deposits in lieu of bonds.

(b) The Secretary of State shall charge a filing fee not to exceed the cost of filing the bond or the deposit in lieu of a bond pursuant to Section 995.710 of the Code of Civil Procedure.

history: (History: Amended by Stats. 1998, Ch. 829, Sec. 10. Effective January 1, 1999.)


text:
(a) The Legislature finds and declares that the widespread sale of seller assisted marketing plans, often connected with the sale of vending machines, racks or work-at-home paraphernalia, has created numerous problems in California for purchasers which are inimical to good business practice. Often purchasers of seller assisted marketing plans are individuals inexperienced in business matters who use their life savings to purchase the seller assisted marketing plan in the hope that they will earn enough money in addition to retirement income or salary to become or remain self-sufficient. Many purchasers are the elderly who are seeking a way to supplement their fixed incomes. The initial payment is usually in the form of a purchase of overpriced equipment or products. California purchasers have suffered substantial losses when they have failed to receive full and complete information regarding the seller assisted marketing plan, the amount of money they can reasonably expect to earn, and the previous experience of the seller assisted marketing plan seller. Seller assisted marketing plan sellers have a significant impact upon the economy and well-being of this state and its local communities. The provisions of this title relating to seller assisted marketing plans are necessary for the public welfare.

(b) It is the intent of this title to provide each prospective seller assisted marketing plan purchaser with the information necessary to make an intelligent decision regarding seller assisted marketing plans being offered; to safeguard the public against deceit and financial hardship; to insure, foster and encourage competition and fair dealing in the sale of seller assisted marketing plans by requiring adequate disclosure; to prohibit representations that tend to mislead; and to prohibit or restrict unfair contract terms. This title shall be construed liberally in order to achieve the foregoing purposes.

history: (History: Added by Stats. 1978, Ch. 876.)

title: 2.7. CONTRACTS FOR SELLER ASSISTED MARKETING PLANS


text:
For the purposes of this title, the following definitions shall apply:

(a) “Seller assisted marketing plan” means any sale or lease or offer to sell or lease any product, equipment, supplies, or services that requires a total initial payment exceeding five hundred dollars ($500), but requires an initial cash payment of less than fifty thousand dollars ($50,000), that will aid a purchaser or will be used by or on behalf of the purchaser in connection with or incidental to beginning, maintaining, or operating a business when the seller assisted marketing plan seller has advertised or in any other manner solicited the purchase or lease of the seller assisted marketing plan and done any of the following acts:

(1) Represented that the purchaser will earn, is likely to earn, or can earn an amount in excess of the initial payment paid by the purchaser for participation in the seller assisted marketing plan.

(2) Represented that there is a market for the product, equipment, supplies, or services, or any product marketed by the user of the product, equipment, supplies, or services sold or leased or offered for sale or lease to the purchaser by the seller, or anything, be it tangible or intangible, made, produced, fabricated, grown, bred, modified, or developed by the purchaser using, in whole or in part, the product, supplies, equipment, or services that were sold or leased or offered for sale or lease to the purchaser by the seller assisted marketing plan seller.

(3) Represented that the seller will buy back or is likely to buy back any product made, produced, fabricated, grown, or bred by the purchaser using, in whole or in part, the product, supplies, equipment, or services that were initially sold or leased or offered for sale or lease to the purchaser by the seller assisted marketing plan seller.

(b) A “seller assisted marketing plan” shall not include:

(1) A security, as defined in the Corporate Securities Law of 1968 (Division 1 (commencing with Section 25000) of Title 4 of the Corporations Code), that has been qualified for sale by the Department of Financial Protection and Innovation, or is exempt under Chapter 1 (commencing with Section 25100) of Part 2 of Division 1 of Title 4 of the Corporations Code from the necessity to qualify.

(2) A franchise defined by the Franchise Investment Law (Division 5 (commencing with Section 31000) of Title 4 of the Corporations Code) that is registered with the Department of Financial Protection and Innovation or is exempt under Chapter 1 (commencing with Section 31100) of Part 2 of Division 5 of Title 4 of the Corporations Code from the necessity of registering.

(3) Any transaction in which either the seller or purchaser or the lessor or lessee is licensed pursuant to and the transaction is governed by the Real Estate Law, Division 4 (commencing with Section 10000) of the Business and Professions Code.

(4) A license granted by a general merchandise retailer that allows the licensee to sell goods, equipment, supplies, products, or services to the general public under the retailer’s trademark, trade name, or service mark if all of the following criteria are satisfied:

(A) The general merchandise retailer has been doing business in this state continually for five years prior to the granting of the license.

(B) The general merchandise retailer sells diverse kinds of goods, equipment, supplies, products, or services.

(C) The general merchandise retailer also sells the same goods, equipment, supplies, products, or services directly to the general public.

(D) During the previous 12 months the general merchandise retailer’s direct sales of the same goods, equipment, supplies, products, or services to the public account for at least 50 percent of its yearly sales of these goods, equipment, supplies, products, or services made under the retailer’s trademark, trade name, or service mark.

(5) A newspaper distribution system distributing newspapers as defined in Section 6362 of the Revenue and Taxation Code.

(6) A sale or lease to an existing or beginning business enterprise that also sells or leases equipment, products, supplies, or performs services that are not supplied by the seller and that the purchaser does not utilize with the equipment, products, supplies, or services of the seller, if the equipment, products, supplies, or services not supplied by the seller account for more than 25 percent of the purchaser’s gross sales.

(7) The sale in the entirety of an “ongoing business.” For purposes of this paragraph, an “ongoing business” means a business that for at least six months previous to the sale has been operated from a particular specific location, has been open for business to the general public, and has had all equipment and supplies necessary for operating the business located at that location. The sale shall be of the entire “ongoing business” and not merely a portion of the ongoing business.

(8) A sale or lease or offer to sell or lease to a purchaser (A) who has for a period of at least six months previously bought products, supplies, services, or equipment that were sold under the same trademark or trade name or that were produced by the seller and, (B) who has received on resale of the product, supplies, services, or equipment an amount that is at least equal to the amount of the initial payment.

(9) The renewal or extension of an existing seller assisted marketing plan contract.

(10) A product distributorship that meets each of the following requirements:

(A) The seller sells products to the purchaser for resale by the purchaser, and it is reasonably contemplated that substantially all of the purchaser’s sales of the product will be at wholesale.

(B) The agreement between the parties does not require that the purchaser pay the seller, or any person associated with the seller, a fee or any other payment for the right to enter into the agreement, and does not require the purchaser to buy a minimum or specified quantity of the products, or to buy products for a minimum or specified period of time. For purposes of this paragraph, a “person associated with the seller” means a person, including an individual or a business entity, controlling, controlled by, or under the same control as the seller.

(C) The seller is a corporation, partnership, limited liability company, joint venture, or any other business entity.

(D) The seller has a net worth of at least ten million dollars ($10,000,000) according to audited financial statements of the seller done during the 18 months preceding the date of the initial sale of products to the purchaser. Net worth may be determined on a consolidated basis if the seller is a subsidiary of another business entity that is permitted by generally accepted accounting standards to prepare financial statements on a consolidated basis and that business entity absolutely and irrevocably agrees in writing to guarantee the seller’s obligations to the purchaser. The seller’s net worth shall be verified by a certification to the Attorney General from an independent certified public accountant that the audited financial statement reflects a net worth of at least ten million dollars ($10,000,000). This certification shall be provided within 30 days following receipt of a written request from the Attorney General.

(E) The seller grants the purchaser a license to use a trademark that is registered under federal law.

(F) It is not an agreement or arrangement encouraging a distributor to recruit others to participate in the program and compensating the distributor for recruiting others into the program or for sales made by others recruited into the program.

(c) “Person” includes an individual, corporation, partnership, limited liability company, joint venture, or any business entity.

(d) “Seller” means a person who sells or leases or offers to sell or lease a seller assisted marketing plan and who meets either of the following conditions:

(1) Has sold or leased or represents or implies that the seller has sold or leased, whether in California or elsewhere, at least five seller assisted marketing plans within 24 months prior to a solicitation.

(2) Intends or represents or implies that the seller intends to sell or lease, whether in California or elsewhere, at least five seller assisted marketing plans within 12 months following a solicitation.

For purposes of this title, the seller is the person to whom the purchaser becomes contractually obligated. A “seller” does not include a licensed real estate broker or salesman who engages in the sale or lease of a “business opportunity” as that term is used in Sections 10000 to 10030, inclusive, of the Business and Professions Code, or elsewhere in Chapter 1 (commencing with Section 10000), Chapter 2 (commencing with Section 10050), or Chapter 6 (commencing with Section 10450) of Part 1 of Division 4 of the Business and Professions Code.

(e) “Purchaser” means a person who is solicited to become obligated or does become obligated on a seller assisted marketing plan contract.

(f) “Equipment” includes machines, all electrical devices, video or audio devices, molds, display racks, vending machines, coin operated game machines, machines that dispense products, and display units of all kinds.

(g) “Supplies” includes any and all materials used to produce, grow, breed, fabricate, modify, develop, or make any product or item.

(h) “Product” includes any tangible chattel, including food or living animals, that the purchaser intends to:

(1) Sell or lease.

(2) Use to perform a service.

(3) Resell or attempt to resell to the seller assisted marketing plan seller.

(4) Provide or attempt to provide to the seller assisted marketing plan seller or to any other person whom the seller suggests the purchaser contact so that the seller assisted marketing plan seller or that other person may assist, either directly or indirectly, the purchaser in distributing, selling, leasing, or otherwise disposing of the product.

(i) “Services” includes any assistance, guidance, direction, work, labor, or services provided by the seller to initiate or maintain or assist in the initiation or maintenance of a business.

(j) “Seller assisted marketing plan contract” or “contract” means any contract or agreement that obligates a purchaser to a seller.

(k) “Initial payment” means the total amount a purchaser is obligated to pay to the seller under the terms of the seller assisted marketing plan contract prior to or at the time of delivery of the equipment, supplies, products, or services or within six months of the purchaser commencing operation of the seller assisted marketing plan. If the contract sets forth a specific total sale price for purchase of the seller assisted marketing plan which total price is to be paid partially as a downpayment and then in specific monthly payments, the “initial payment” means the entire total sale price.

(l) “Initial cash payment” or “downpayment” means that portion of the initial payment that the purchaser is obligated to pay to the seller prior to or at the time of delivery of equipment, supplies, products, or services. It does not include any amount financed by or for which financing is to be obtained by the seller, or financing that the seller assists in obtaining.

(m) “Buy-back” or “secured investment” means any representation that implies in any manner that the purchaser’s initial payment is protected from loss. These terms include a representation or implication of any of the following:

(1) That the seller may repurchase either all or part of what it sold to the purchaser.

(2) That the seller may at some future time pay the purchaser the difference between what has been earned and the initial payment.

(3) That the seller may in the ordinary course buy from the purchaser items made, produced, fabricated, grown, bred, modified, or developed by the purchaser using, in whole or in part, the product, supplies, equipment, or services that were initially sold or leased to the purchaser by the seller.

(4) That the seller or a person to whom the seller will refer the purchaser may in the ordinary course sell, lease, or distribute the items the purchaser has for sale or lease.

history: (History: Amended by Stats. 2022, Ch. 452, Sec. 26. (SB 1498) Effective January 1, 2023.)

path: 2.7. CONTRACTS FOR SELLER ASSISTED MARKETING PLANS


text:
(a) An offer to sell or offer to lease a seller assisted marketing plan shall occur in this state whenever:

(1) The offer to sell or offer to lease is made in this state;

(2) The purchaser resides in this state at the time of the offer; or

(3) The offer to sell or offer to lease either originates from this state or is directed by the seller or lessor to this state and received at the place to which it is directed.

(b) A sale or lease of a seller assisted marketing plan shall occur in this state whenever:

(1) The offer to sell or offer to lease is accepted in this state;

(2) The purchaser resides in this state at the time of the sale; or

(3) The acceptance is communicated to a seller situated in this state.


text:
(a) The seller of any seller assisted marketing plan shall pay an annual fee in the amount of one hundred dollars ($100) and annually file with the Attorney General a copy of the disclosure statements required under Sections 1812.205 and 1812.206, as well as a list of the names and resident addresses of those individuals who sell the seller assisted marketing plan on behalf of the seller. The first filing shall be made at least 30 days prior to placing any advertisement or making any other representations to prospective purchasers. The first filing shall not be deemed to be effective until a notice of filing has been issued by the Attorney General. The seller may not make any advertisement or other representation to prospective purchasers until a notice of filing has been issued by the Attorney General. The disclosure statements on file shall be updated through a new filing and payment of a fee in the amount of thirty dollars ($30), whenever material changes occur during the year following the annual filing and the updated filing shall include all disclosure statements required by Sections 1812.205 and 1812.206 and a list of the names and resident addresses of all current salespersons and all salespersons who have acted on behalf of the seller since the previous filing, whether the annual filing or an updated filing, indicating which salespersons are still active and which no longer act on behalf of the seller. Each seller of a seller assisted marketing plan shall file the annual renewal filing, whether or not any update filings have been made, at least 10 days before one year has elapsed from the date of the notice of filing issued by the Attorney General, and at least 10 days before the same date every year thereafter. The annual renewal filing shall include all disclosure statements required by Sections 1812.205 and 1812.206 and a list of the names and addresses of the residences of all current salespersons and all salespersons who have acted on behalf of the seller since the previous filing (whether the annual filing or an updated filing), indicating which salespersons are still active and which no longer act on behalf of the seller. The annual renewal filing fee shall be one hundred dollars ($100). If an annual renewal filing is not filed as required, the previous filing shall be deemed to have lapsed and the seller shall be prohibited from placing any seller assisted marketing plan advertisements or making any other representations to prospective purchasers of seller assisted marketing plan until a new annual filing is made and a new notice of filing has been issued by the Attorney General.

(b) The Attorney General may send by certified mail to the address set forth in the seller assisted marketing plan filing an intent to issue a stop order denying the effectiveness of or suspending or revoking the effectiveness of any filing if he or she finds the following:

(1) That there has been a failure to comply with any of the provisions of this title.

(2) That the offer or sale of the seller assisted marketing plan would constitute a misrepresentation to, or deceit of, or fraud on, the purchaser.

(3) That any person identified in the filing has been convicted of an offense under paragraph (1) of subdivision (b) of Section 1812.206, or is subject to an order or has had a civil judgment entered against him or her as described in paragraphs (2) and (3) of subdivision (b) of Section 1812.206, and the involvement of that person in the sale or management of the seller assisted marketing plan creates an unreasonable risk to prospective purchasers.

(c) The notice referred to shall include facts supporting a suspension or revocation. If the seller assisted marketing plan does not submit to the Attorney General, under penalties of perjury signed by an owner or officer of the seller assisted marketing plan, within 10 days of receipt of the intent to issue a stop order, a refutation of each and every supporting fact set forth in the notice, and each fact not refuted shall be deemed, for purposes of issuance of the order, an admission that the fact is true. If, in the opinion of the Attorney General, and based upon supporting facts not refuted by the seller assisted marketing plan, the plan is offered to the public without compliance with this title, the Attorney General may order the seller to desist and refrain from the further sale or attempted sale of the seller assisted marketing plan unless and until a notice of filing has been issued pursuant to this section. Until that time, the registration shall be void. The order shall be in effect until and unless the seller assisted marketing plan files a proceeding in superior court pursuant to Section 1085 or 1094.5 of the Code of Civil Procedure or seeks other judicial relief and serves a copy of the proceeding upon the Attorney General.

history: (History: Amended by Stats. 1998, Ch. 595, Sec. 1. Effective January 1, 1999.)


text:
In selling, leasing, or offering to sell or lease a seller assisted marketing plan in this state, sellers shall not:

(a) Use the phrase “buy-back” or “secured investment” or similar phrase orally or in writing when soliciting, offering, leasing, or selling a seller assisted marketing plan if the “security” is the value of the equipment, supplies, products or services supplied by the seller to the purchaser.

(b) Use the phrase “buy-back” or “secured investment” or similar phrase orally or in writing when soliciting, offering, leasing, or selling a seller assisted marketing plan unless there are no restrictions or qualifications whatsoever preventing or limiting a purchaser from being able to invoke the “buy-back” or “secured” portion of the seller assisted marketing plan contract at any time the purchaser desires during the one-year period following the contract date. Upon invocation of the “buy-back” or “security” provision, the minimum amount a purchaser shall be entitled to have returned to him is the full amount of his initial payment, less the amount actually received by him from the operation of the seller assisted marketing plan. The “amount actually received” means either the amount the purchaser actually obtained from the seller for any product resold to the seller or the amount of money the purchaser received for use of the purchaser’s product, equipment, supplies or services, less any amount: (1) the purchaser has paid the owner or manager of the location at which the purchaser’s products, equipment, supplies or services are placed; and (2) the purchaser has paid to obtain other items needed in order to sell, make, produce, fabricate, grow, breed, modify, or develop the item which the seller assisted marketing plan purchaser intends to sell, lease, distribute, or otherwise dispose of.

(c) Represent that a purchaser’s initial payment is “secured” in any manner or to any degree or that the seller provides a “buy-back” arrangement unless the seller has, in conformity with subdivision (b) of Section 1812.214, either obtained a surety bond issued by a surety company admitted to do business in this state or established a trust account at a federally insured bank or savings and loan association located in this state.

(d) Represent that the seller assisted marketing plan provides income or earning potential of any kind unless the seller has data to substantiate the claims of income or earning potential and discloses this data to the purchaser at the time the claim is made, if made in person, or if made through written or telephonic communication, at the first in-person communication thereafter and, when disclosed, the data is left with the purchaser. A mathematical computation of the number of sales multiplied by the amount of profit per sale to reach a projected income figure is not sufficient data to substantiate an income or earning potential claim. Income or earning potential claims cannot be made or implied at all unless they are based on the experience of at least 10 purchasers from the seller assisted marketing plan being offered. The data left by the seller must, at a minimum, disclose:

(1) The length of time the seller has been selling the particular seller assisted marketing plan being offered;

(2) The number of purchasers from the seller known to the seller to have made at least the same sales, income or profits as those represented; and

(3) The percentage the number represents of the total number of purchasers from the seller.

(e) Use the trademark, service mark, trade name, logotype, advertising or other commercial symbol of any business which does not either control the ownership interest in the seller or accept responsibility for all representations made by the seller in regard to the seller assisted marketing plan, unless the nature of the seller’s relationship to such other business entity is set forth immediately adjacent to and in type size equal to or larger than that used to depict the commercial symbol of such other business. If a member of a trade association, the seller may use the logo or registration mark of the trade association in advertisements and materials without regard to this subdivision.

(f) Place or cause to be placed any advertisement for a seller assisted marketing plan which does not include the actual business name of the seller, and if it differs, the name under which the seller assisted marketing plan is operated and the street address of the principal place of business of the seller.

history: (History: Amended by Stats. 1981, Ch. 258, Sec. 2.)


text:
At the first in-person communication with a potential purchaser or in the first written response to an inquiry by a potential purchaser, whichever occurs first, wherein the seller assisted marketing plan is described, the seller or his or her representative shall provide the prospective purchaser a written document, the cover sheet of which is entitled in at least 16-point boldface capital letters “DISCLOSURE REQUIRED BY CALIFORNIA LAW.” Under the title shall appear in boldface of at least 10-point type, the statement: “The State of California has not reviewed and does not approve, recommend, endorse or sponsor any seller assisted marketing plan. The information contained in this disclosure has not been checked by the state. If you have any questions about this purchase, see an attorney or other financial adviser before you sign a contract or agreement.” Nothing shall appear on the cover sheet except the title and the statement required above. The disclosure document shall contain the following information:

(a) The name of the seller, the name under which the seller is doing or intends to do business and the name of any parent or affiliated company that will engage in business transactions with purchasers or accept responsibility for statements made by the seller.

(b) A statement of the initial payment to be paid by the purchaser to the seller, or when not known, a statement of the approximate initial payment charged, the amount of the initial payment to be paid to a person inducing, directly or indirectly, a purchaser to contract for the seller assisted marketing plan.

(c) A full and detailed description of the actual services the seller will undertake to perform for the purchaser.

(d) When the seller makes any statement concerning earnings or range of earnings that may be made through the seller assisted marketing plan, he must comply with subdivision (d) of Section 1812.204 and set forth in complete form in this disclosure statement the following:

“No guarantee of earnings or ranges of earnings can be made. The number of purchasers who have earned through this business an amount in excess of the amount of their initial payment is at least ______, which represents ___ percent of the total number of purchasers of this seller assisted marketing plan.”

(e) If training of any type is promised by the seller, a complete description of the training and the length of the training.

(f) If the seller promises services to be performed in connection with the placement of the equipment, product or supplies at a location from which they will be sold or used, the full nature of those services as well as the nature of the agreements to be made with the owner or manager of the location at which the purchaser’s equipment, product or supplies will be placed, must be set forth.

(g) If the seller represents orally or in writing when soliciting or offering for sale or lease or selling or leasing a seller assisted marketing plan that there is a “buy-back” arrangement or that the initial payment is in some manner protected from loss or “secured,” the entire and precise nature of the “buy-back”, “protection” or “security” arrangement shall be completely and clearly disclosed.

history: (History: Amended by Stats. 1981, Ch. 258, Sec. 3.)


text:
At least 48 hours prior to the execution of a seller assisted marketing plan contract or agreement or at least 48 hours prior to the receipt of any consideration, whichever occurs first, the seller or his or her representative shall provide to the prospective purchaser in writing a document entitled “SELLER ASSISTED MARKETING PLAN INFORMATION SHEET.” The seller may combine the information required under this section with the information required under Section 1812.205 and, if done, shall utilize the single title “DISCLOSURES REQUIRED BY CALIFORNIA LAW,” and the title page required by Section 1812.205. If a combined document is used, it shall be given at the time required by Section 1812.205, provided that this time meets the 48-hour test of this section. The information sheet required by this section shall contain the following:

(a) The name of and the office held by the seller’s owners, officers, directors, trustees and general or limited partners, as the case may be, and the names of those individuals who have management responsibilities in connection with the seller’s business activities.

(b) A statement whether the seller, any person identified in subdivision (a), and any other company managed by a person identified in subdivision (a):

(1) Has been convicted of a felony or misdemeanor or pleaded nolo contendere to a felony or misdemeanor charge if the felony or misdemeanor involved an alleged violation of this title, fraud, embezzlement, fraudulent conversion or misappropriation of property.

(2) Has been held liable in a civil action by final judgment or consented to the entry of a stipulated judgment if the civil action alleged a violation of this title, fraud, embezzlement, fraudulent conversion or misappropriation of property or the use of untrue or misleading representations in an attempt to sell or dispose of real or personal property or the use of unfair, unlawful or deceptive business practices.

(3) Is subject to any currently effective agreement, injunction, or restrictive order, including, but not limited to, a “cease and desist” order, an “assurance of discontinuance,” or other comparable agreement or order, relating to business activity as the result of an action or investigation brought by a public agency or department, including, but not limited to, an action affecting any vocational license.

The statements required by paragraphs (1), (2) and (3) of this subdivision shall set forth the terms of the agreement, or the court, the docket number of the matter, the date of the conviction or of the judgment and, when involved, the name of the governmental agency that initiated the investigation or brought the action resulting in the conviction or judgment.

(4) Has at any time during the previous seven fiscal years been the subject of an order for relief in bankruptcy, been reorganized due to insolvency, or been a principal, director, officer, trustee, general or limited partner, or had management responsibilities of any other person, as defined in subdivision (b) of Section 1812.201, that has so filed or was so reorganized, during or within one year after the period that the individual held that position. If so, the name and location of the person having so filed, or having been so reorganized, the date thereof, the court which exercised jurisdiction, and the docket number of the matter shall be set forth.

(c) The length of time the seller:

(1) Has sold seller assisted marketing plans.

(2) Has sold the specific seller assisted marketing plan being offered to the purchaser.

(d) If the seller is required to secure a bond or establish a trust account pursuant to the requirements of Section 1812.204, the information sheet shall state either:

(1) “Seller has secured a bond issued by,(name and address of surety company)a surety company admitted to do business in this state. Before signing a contract to purchase this seller assisted marketing plan, you should check with the surety company to determine the bond’s current status,” or

(2) “Seller has deposited with the office of the Attorney General information regarding its trust account. Before signing a contract to purchase this seller assisted marketing plan, you should check with the Attorney General to determine the current status of the trust account.”

(e) A copy of a recent, not more than 12 months old, financial statement of the seller, together with a statement of any material changes in the financial condition of the seller from the date thereof. That financial statement shall either be audited or be under penalty of perjury signed by one of the seller’s officers, directors, trustees or general or limited partners. The declaration under penalty of perjury shall indicate that to the best of the signatory’s knowledge and belief the information in the financial statement is true and accurate; the date of signature and the location where signed shall also be indicated. Provided, however, that where a seller is a subsidiary of another corporation which is permitted by generally accepted accounting standards to prepare financial statements on a consolidated basis, the above information may be submitted in the same manner for the parent if the corresponding financial statement of the seller is also provided and the parent absolutely and irrevocably has agreed to guarantee all obligations of the seller.

(f) An unexecuted copy of the entire seller assisted marketing plan contract.

(g) For purposes of this section, “seller’s owners” means any individual who holds an equity interest of at least 10 percent in the seller.

history: (History: Amended by Stats. 2009, Ch. 500, Sec. 13. (AB 1059) Effective January 1, 2010.)


text: Every contract for sale or lease of a seller assisted marketing plan in this state shall be in writing and shall be subject to the provisions of this title. A copy of the fully completed contract and all other documents the seller requires the purchaser to sign shall be given to the purchaser at the time they are signed.


text: The purchaser shall have the right to cancel a seller assisted marketing plan contract for any reason at any time within three business days of the date the purchaser and the seller sign the contract. The notice of the right to cancel and the procedures to be followed when a contract is canceled shall comply with Section 1812.209.


text:
Every seller assisted marketing plan contract shall set forth in at least 10-point type or equivalent size if handwritten, all of the following:

(a) The terms and conditions of payment including the initial payment, additional payments, and downpayment required. If the contract provides for the seller to receive more than 20 percent of the initial payment before delivery to the purchaser of the equipment, supplies or products or services to be furnished under the terms of the contract, the contract shall clearly set forth for the escrow account established pursuant to subdivision (b) of Section 1812.210 and the name and address of the escrow account holder, as well as the institution, branch, and account number of the escrow account. If the contract provides for payment of any amount in excess of 20 percent of the initial payment prior to delivery of the equipment, supplies or products or services to be furnished under the terms of the contract, the contract shall set forth that payment of the amount in excess of 20 percent shall be by separate instrument made payable to the escrow account.

(b) Immediately above the place at which the purchaser signs the contract the following notification, in boldface type, of the purchaser’s right to cancel the contract:

“You have three business days in which you may cancel this contract for any reason by mailing or delivering written notice to the seller assisted marketing plan seller. The three business days shall expire on (last date to mail or deliver notice)and notice of cancellation should be mailed or delivered to.(seller assisted marketing plan seller’s name and business street address) If you choose to mail your notice, it must be placed in the United States mail properly addressed, first-class postage prepaid, and postmarked before midnight of the above date. If you choose to deliver your notice to the seller directly, it must be delivered to him by the end of his normal business day on the above date. Within five business days of receipt of the notice of cancellation, the seller shall return to the purchaser all sums paid by the purchaser to the seller pursuant to this contract. Within five business days after receipt of all such sums, the purchaser shall make available at his address or at the place at which they were caused to be located, all equipment, products and supplies provided to the purchaser pursuant to this contract. Upon demand of the seller, such equipment, products and supplies shall be made available at the time the purchaser receives full repayment by cash, money order or certified check.”

(c) A full and detailed description of the acts or services the seller will undertake to perform for the purchaser.

(d) The seller’s principal business address and the name and the address of its agent, other than the Secretary of State, in the State of California authorized to receive service of process.

(e) The business form of the seller, whether corporate, partnership or otherwise.

(f) The delivery date or, when the contract provides for a staggered delivery of items to the purchaser, the approximate delivery date of those products, equipment or supplies the seller is to deliver to the purchaser to enable the purchaser to begin or maintain his business and whether the products, equipment or supplies are to be delivered to the purchaser’s home or business address or are to be placed or caused to be placed by the seller at locations owned or managed by persons other than the purchaser.

(g) A complete description of the nature of the “buy-back”, “protection”, or “security” arrangement, if the seller has represented orally or in writing when selling or leasing, soliciting or offering a seller assisted marketing plan that there is a “buy-back” or that the initial payment or any part of it is “protected” or “secured.”

(h) A statement which accurately sets forth a purchaser’s right to void the contract under the circumstances and in the manner set forth in subdivisions (a) and (b) of Section 1812.215.

(i) The name of the supplier and the address of such supplier of the products, equipment, or supplies the seller is to deliver to the purchaser to enable the purchaser to begin or maintain his business.

history: (History: Amended by Stats. 1989, Ch. 1021, Sec. 4.)


text:
(a) No seller assisted marketing plan contract shall require or entail the execution of any note or series of notes by the purchaser which, when separately negotiated, will cut off as to third parties any right of action or defense which the purchaser may have against the seller.

(b) If the contract referred to in Section 1812.209 provides for a downpayment to be paid to the seller, the downpayment shall not exceed 20 percent of the initial payment amount. In no event shall the contract payment schedule provide for the seller to receive more than 20 percent of the initial payment before delivery to the purchaser, or to the place at which they are to be located, the equipment, supplies or products, unless all sums in excess of 20 percent are placed in an escrow account as provided for in subdivision (c) of Section 1812.214. Funds placed in an escrow account shall not be released until the purchaser notifies the escrow holder in writing of the delivery of such equipment, supplies or products within the time limits set forth in the seller assisted marketing plan contract. Notification of delivery by the purchaser to the escrow holder shall not be unreasonably withheld.

history: (History: Amended by Stats. 1989, Ch. 1021, Sec. 5.)


text: Any assignee of the seller assisted marketing plan contract or the seller’s rights is subject to all equities, rights and defenses of the purchaser against the seller.


text: No seller shall make or authorize the making of any reference to its compliance with this title.


text: Every seller shall at all times keep and maintain a complete set of books, records and accounts of seller assisted marketing plan sales made by the seller. All documents relating to each specific seller assisted marketing plan sold or leased shall be maintained for four years after the date of the seller assisted marketing plan contract.


text:
(a) Every seller of seller-assisted marketing plans other than a California corporation shall file with the Attorney General an irrevocable consent appointing the Secretary of State or successor in office to act as the seller’s attorney to receive service or any lawful process in any noncriminal suit, action or proceeding against the seller or the seller’s successor, executor or administrator, which may arise under this title. When service is made upon the Secretary of State, it shall have the same force and validity as if served personally on the seller. Service may be made by leaving a copy of the process in the office of the Secretary of State, but it shall not be effective unless:

(1) The plaintiff forthwith sends by first-class mail a notice of the service upon the Secretary of State and a copy of the process to the defendant or respondent at the last address on file with the Attorney General; and

(2) The plaintiff’s affidavit of compliance with this section is filed in the case on or before the return date of the process, if any, or within such further time as the court allows.

(b) If, pursuant to subdivision (c) of Section 1812.204, a seller must obtain a surety bond or establish a trust account, the following procedures apply:

(1) If a bond is obtained, a copy of it shall be filed with the Attorney General; if a trust account is established, notification of the depository, the trustee and the account number shall be filed with the Attorney General.

(2) The bond or trust account required shall be in favor of the State of California for the benefit of any person who is damaged by any violation of this title or by the seller’s breach of a contract subject to this title or of any obligation arising therefrom. The trust account shall also be in favor of any person damaged by these practices.

(3) Any person claiming against the trust account for a violation of this title may maintain an action at law against the seller and the trustee. The surety or trustee shall be liable only for actual damages and not the punitive damages permitted under Section 1812.218. The aggregate liability of the trustee to all persons damaged by a seller’s violation of this title shall in no event exceed the amount of the trust account.

(4) The bond or the trust account shall be in an amount equal to the total amount of the “initial payment” section of all seller-assisted marketing plan contracts the seller has entered into during the previous year or three hundred thousand dollars ($300,000), whichever is less, but in no case shall the amount be less than fifty thousand dollars ($50,000). The amount required shall be adjusted twice a year, no later than the tenth day of the first month of the seller’s fiscal year and no later than the tenth day of the seventh month of the seller’s fiscal year. A seller need only establish a bond or trust account in the amount of fifty thousand dollars ($50,000) at the commencement of business and during the first six months the seller is in business. By the tenth day of the seller’s seventh month in business, the amount of the bond or trust account shall be established as provided for herein as if the seller had been in business for a year.

(c) If, pursuant to subdivision (b) of Section 1812.210, a seller utilizes an escrow account to receive those portions of the downpayment in excess of 20 percent of the initial payment before delivery to the purchaser of the equipment, supplies or products or services to be furnished under the terms of the contract, the following procedures shall apply:

(1) The holder of the escrow account shall be independent of the seller, and the seller shall not have any authority to direct disbursements from the escrow account by the holder except upon written notification by the purchaser to the holder of the escrow account of the delivery of the equipment, supplies, or products as required by and within the time limits set forth in the seller assisted marketing plan contract.

(2) The name and address of the escrow account holder, the name of the institution, the branch and account number of the escrow account shall be reported to the Attorney General by the seller.

(3) Any person claiming against the escrow account for a violation of this title may maintain an action at law against the seller and the escrow account holder. The escrow account holder shall be liable only for actual damages and not the punitive damages permitted under Section 1812.218. The aggregate liability of the escrow account holder to all persons damaged by a seller’s violation of this title shall in no event exceed the amount of the escrow account.

history: (History: Amended by Stats. 1990, Ch. 1491, Sec. 3.)


text:
(a) If a seller uses any untrue or misleading statements to sell or lease a seller assisted marketing plan, or fails to comply with Section 1812.203, or fails to give the disclosure documents or disclose any of the information required by Sections 1812.205 and 1812.206, or the contract does not comply with the requirements of this title, then within one year of the date of the contract at the election of the purchaser upon written notice to the seller, the contract shall be voidable by the purchaser and unenforceable by the seller or his assignee as contrary to public policy and the purchaser shall be entitled to receive from the seller all sums paid to the seller when the purchaser is able to return all equipment, supplies or products delivered by the seller; when such complete return cannot be made, the purchaser shall be entitled to receive from the seller all sums paid to the seller less the fair market value at the time of delivery of the equipment, supplies or products not returned by the purchaser, but delivered by the seller. Upon the receipt of such sums, the purchaser shall make available to the seller at the purchaser’s address or at the places at which they are located at the time the purchaser gives notice pursuant to this section, the products, equipment or supplies received by the purchaser from the seller. Provided, however, if the seller inadvertently has failed to make any of the disclosures required by Section 1812.205 or 1812.206 or the contract inadvertently fails to comply with the requirements of this title, the seller may cure such inadvertent defect by providing the purchaser with the correct disclosure statements or contract if at the time of providing such correct disclosures or contract the seller also informs the purchaser in writing that because of the seller’s error, the purchaser has an additional 15-day period after receipt of the correct disclosures or contract within which to cancel the contract and receive a full return of all moneys paid in exchange for return of whatever equipment, supplies or products the purchaser has. If the purchaser does not cancel the contract within 15 days after receipt of the correct disclosures or contract, he may not in the future exercise his right to void the contract under this section due to such noncompliance with the disclosure or contract requirements of this title.

(b) If a seller fails to deliver the equipment, supplies or product within 30 days of the delivery date stated in the contract, unless such delivery delay is beyond the control of the seller, then at any time prior to delivery or within 30 days after delivery, at the election of the purchaser upon written notice to the seller, the contract shall be voidable by the purchaser and unenforceable by the seller or his assignee as contrary to public policy.

The rights of the purchaser set forth in this section shall be cumulative to all other rights under this title or otherwise.

history: (History: Amended by Stats. 1981, Ch. 258, Sec. 8.)


text:
(a) Any waiver by a purchaser of the provisions of this title shall be deemed contrary to public policy and shall be void and unenforceable. Any attempt by a seller to have a purchaser waive rights given by this title shall be a violation of this title.

(b) In any proceeding involving this title, the burden of proving an exemption or an exception from a definition is upon the person claiming it.

history: (History: Amended by Stats. 1981, Ch. 258, Sec. 9.)


text: Any person, including, but not limited to, the seller, a salesman, agent or representative of the seller or an independent contractor who attempts to sell or lease or sells or leases a seller assisted marketing plan, who willfully violates any provision of this title or employs, directly or indirectly, any device, scheme or artifice to deceive in connection with the offer or sale of any seller assisted marketing plan, or willfully engages, directly or indirectly, in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person in connection with the offer, purchase, lease or sale of any seller assisted marketing plan shall, upon conviction, be fined not more than ten thousand dollars ($10,000) for each unlawful transaction, or imprisoned pursuant to subdivision (h) of Section 1170 of the Penal Code, or imprisoned in a county jail for not more than one year, or be punished by both that fine and imprisonment.

history: (History: Amended by Stats. 2011, Ch. 15, Sec. 34. (AB 109) Effective April 4, 2011. Operative October 1, 2011, by Sec. 636 of Ch. 15, as amended by Stats. 2011, Ch. 39, Sec. 68.)


text: Any purchaser injured by a violation of this title or by the seller’s breach of a contract subject to this title or of any obligation arising from the sale or lease of the seller assisted marketing plan may bring any action for recovery of damages. Judgment shall be entered for actual damages, plus reasonable attorney’s fees and costs, but in no case shall the award of damages be less than the amount of the initial payment provided the purchaser is able to return all the equipment, supplies or products delivered by the seller; when such complete return cannot be made, the minimum award shall be no less than the amount of the initial payment less the fair market value at the time of delivery of the equipment, supplies or products that cannot be returned but were actually delivered by the seller. An award, if the trial court deems it proper, may be entered for punitive damages.


text:
The provisions of this title are not exclusive. The remedies provided herein for violation of any section of this title or for conduct proscribed by any section of this title shall be in addition to any other procedures or remedies for any violation or conduct provided for in any other law.

Nothing in this title shall limit any other statutory or any common law rights of the Attorney General, any district attorney or city attorney, or any other person. If any act or practice proscribed under this title also constitutes a cause of action in common law or a violation of another statute, the purchaser may assert such common law or statutory cause of action under the procedures and with the remedies provided for in such other law.


text: If any provision of this act or if any application thereof to any person or circumstance is held unconstitutional, the remainder of the title and the application of such provision to other persons and circumstances shall not be affected thereby.


text:
(a) When a deposit has been made in lieu of bond pursuant to paragraph (1) of subdivision (b) of Section 1812.214 and Section 995.710 of the Code of Civil Procedure, the person asserting a claim against the deposit shall, in lieu of the provisions of Section 996.430 of the Code of Civil Procedure, establish the claim by furnishing evidence to the Attorney General of a money judgment entered by a court together with evidence that the claimant is a person described in paragraph (2) of subdivision (b) of Section 1812.214.

(b) When a person has completely established the claim with the Attorney General, the Attorney General shall forthwith review and approve the claim and enter the date of approval thereon. The claim shall be designated an “approved claim. ”

(c) When the first claim against a particular deposit account has been approved, it shall not be paid until the expiration of a period of 240 days after the date of its approval by the Attorney General. Subsequent claims which are approved by the Attorney General within the same 240-day period shall similarly not be paid until the expiration of the 240-day period. Forthwith upon the expiration of the 240-day period, the Attorney General shall pay all approved claims from that 240-day period in full unless there are insufficient funds in the deposit account in which case each approved claim shall be paid a proportionate amount to exhaust the deposit account.

(d) When the Attorney General approves the first claim against a particular deposit account after the expiration of a 240-day period, the date of approval of that claim shall begin a new 240-day period to which subdivision (c) shall apply with respect to the amount remaining in the deposit account.

(e) After a deposit account is exhausted, no further claims shall be paid by the Attorney General. Claimants who have had their claims paid in full or in part pursuant to subdivisions (c) and (d) shall not be required to make a contribution back to the deposit account for the benefit of other claimants.

(f) When a deposit has been made in lieu of bond, the amount of the deposit shall not be subject to attachment, garnishment, or execution with respect to an action or judgment against the seller, other than as to an amount as no longer needed or required for the purpose of this title which would otherwise be returned to the seller by the Attorney General.

history: (History: Amended by Stats. 1989, Ch. 1021, Sec. 7.)


text:
For the purposes of this title:

(a) “Membership camping operator” means any enterprise, other than one that is tax exempt under Section 501(c)(3) of the Internal Revenue Code of 1954, as amended, that has as one of its purposes the ownership or operation of campgrounds which include or may include use of camping sites, that solicits membership paid for by a fee or periodic payments, such as annual dues, and the contractual members are the primary intended users. “Membership camping operator” does not include camping or recreational trailer parks, as defined in Section 18215 of the Health and Safety Code, which are open to the general public and which contain camping sites rented for a per use fee, or a “mobilehome park,” as defined in either Section 798.4 of the Civil Code or Section 18214 of the Health and Safety Code.

As used in this title, “seller” means membership camping operator.

(b) “Membership camping contract” means an agreement offered or sold within the State of California by a membership camping operator or membership camping broker evidencing a purchaser’s right or license to use for more than 14 days in a year, the campgrounds of a membership camping operator and includes a membership which provides for this use.

(c) “Camping site” means a space designed and promoted for the purpose of locating a trailer, tent, tent trailer, pickup camper, or other similar device used for camping.

(d) “Offer” means any solicitation reasonably designed to result in entering into a membership camping contract.

(e) “Person” means any individual, corporation, partnership, limited liability company, trust, association, or other organization other than a government or a subdivision thereof.

(f) “Purchaser” means a person who enters into a membership camping contract and thereby obtains the right to use the campgrounds of a membership camping operator.

(g) “Sale” or “sell” means entering into, or other disposition, of a membership camping contract for value. The term “value” does not include a reasonable fee to offset the administrative costs of transfer of a membership camping contract.

(h) “Campground” means real property within this state owned or operated by a membership camping operator and designated in whole or in part by the membership camping operator as available for camping or outdoor recreation by purchasers of membership camping contracts.

(i) “Blanket encumbrance” means any mortgage, deed of trust, option to purchase, vendor’s lien or interest under a contract or agreement of sale, or other financing lien or encumbrance granted by the membership camping operator or affiliate which secures or evidences the obligation to pay money or to sell or convey any campgrounds made available to purchasers by the membership camping operator or any portion thereof, and which authorizes, permits, or requires the foreclosure or other disposition of the campground.

(j) “Nondisturbance agreement” means an instrument in recordable form by which the holder of a blanket encumbrance agrees to all of the following:

(1) The holder’s rights in any campground made available to purchasers, prior or subsequent to the agreement, by the membership camping operator shall be subordinate to the rights of purchasers from and after the recordation of the nondisturbance agreement.

(2) The holder and all successors and assignees of the holder, and any person who acquires the campground through foreclosure or by deed in lieu of foreclosure of the blanket encumbrance shall take the campground subject to the rights of purchasers.

(3) The holder or any successor acquiring the campground through the blanket encumbrance shall not use or cause the campground to be used in a manner which would materially prevent purchasers from using or occupying the campground in a manner contemplated by the purchasers’ membership camping contracts. However, the holder shall have no obligation to, and no liability for failure to assume the responsibilities or obligations of, the membership camping operator under the membership camping contracts.

(k) “Membership camping contract broker” means a person who, for compensation, resells or offers to resell a membership camping contract to a new purchaser on behalf of a prior purchaser. Membership camping contract broker does not include a membership camping operator or its employees or agents.

history: (History: Amended by Stats. 1994, Ch. 1010, Sec. 45. Effective January 1, 1995.)

title: 2.8. MEMBERSHIP CAMPING CONTRACTS

path: 2.8. MEMBERSHIP CAMPING CONTRACTS


text: The membership camping contracts and persons covered by this title shall be subject to Chapter 5 (commencing with Section 17200) of Part 2 of Division 7 and Article 1 (commencing with Section 17500) of Chapter 1 of Part 3 of Division 7 of the Business and Professions Code and the Unruh Act (Chapter 1 (commencing with Section 1801) of Title 2 of Part 4 of Division 3).

history: (History: Amended by Stats. 1990, Ch. 1529, Sec. 5.)

title: 2.8. MEMBERSHIP CAMPING CONTRACTS